Calculate arithmetic average of the annual rates of return

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The following tab1e shows the NYSE composite index over a recent 15-year period: End of NYSE Year Composite 1988 156.26 1989 195.01 1990 180.49 1991 229.44 1992 240.21 1993 259.08 1994 250.94 1995 329.51 1996 392.30 1997 511.19 1998 595.81 1999 650.30 2000 656.87 2001 589.80 2002 472.87 2003 646.40 A. Ignoring dividends, calculate the simple annual rates of return. B. Calculate the arithmetic average of the annual rates of return. C. Calculate the geometric average of the annual rates of return. D. Compare your answers in Parts b and c. How do you account for the difference between these averages?

Reference no: EM131188242


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